Foreclosure Process Basics
When a homeowner cannot make his or her mortgage payments and defaults on his or her agreement to make timely mortgage payments, a foreclosure will occur and the foreclosure process will be initiated by the mortgage lender. The ultimate outcome from the foreclosure process is the subject property being taken over by the mortgage lender and sold.
First Stage Of Foreclosure Process
The foreclosure process takes months if not over a year, possibly years depending on the geographical region the property is located and the laws of the state of the subject property. When a mortgage loan borrower falls behind on their mortgage payment and cannot come into a repayment plan with their mortgage lender, the mortgage lender will intiated foreclosure proceedings. This normally does not happen unless the homeowner is at least four or more months behind. The mortgage lender will give the homeowner an opportunity to pay the payments that have been behind or enter into a payment plan and most homeowners will make payment arrangements, however, for those homeowners who have lost their businesses or lost their jobs and cannot gain employment and have no family members to bail them out, their options are limited.
For those homeowners that cannot enter into a repayment agreement with the mortgage lender, the mortgage lender will start the foreclosure process. The first stage of the foreclosure process happens if the homeowner has missed at least four monthly payments. Sometimes the foreclosure process is not initiated until six or more months after the first missed payment. The mortgage lender will request the appointment of a trustee to record a NOD, which is a Notice of Default. This is recorded at the County Recorder of Deeds Office in which the subject property is located at. The foreclosure process will give the homeowner notice once this is filed and this is when the official reinstatement period starts. The reinstatement period normally is good until a week or so prior to the subject property being auctioned off at a sheriff’s sale.
In the event if the mortgage default is not brought current within three months, the courts will issue a foreclosure date for the sale of the subject property. The mortgage loan borrower will be receiving a notice of sale notice. The notice of sale notice will also be posted on the subject property and will eventually be published in various local newspapers for a period of several weeks.
Trustee Sale During Foreclosure Process
A designated date, time, and location will be published through the publication of the notice of sale for the foreclosure trustee sale. It is normally held at a county site where the subject property is located at. The sale is an auction and will be auctioned off as a public auction and offered to the highest bidder. The winning bidder needs to have a certain percentage of cash down payment and needs to come up with the balance within the next 24 or 48 hours or he or she will lose the initial cash deposit. The winning property bidder will then get the rights and ownership of the foreclosed property via trustees deed to the foreclosed property.
Foreclosure Bidding Auction Process Of Subject Property
The opening bid price for the subject property is set by the mortgage lender who owns the foreclosed property. The opening bid is normally the balance of the mortgage balance of the subject property along with the accrued interest, attorney costs, and other fees the mortgage lender has accrued. In the event if there are no bidders for the property, the property will be bought by the mortgage lender’s representative which is normally an attorney. Many times, the mortgage lender will purchase the property back and will hold it as their asset for future resale. This is often called Real Estate Owned, often referred as a REO property. When a foreclosed property is auctioned off at the sheriff’s sale whether by a public bidder or the mortgage lender, all secondary and junior liens are expunged. For those purchasing Real Estate Owned properties, REO, by a mortgage lender, they will get clean title to the property with no secondary or junior liens attached to title.